Correlation Between NLIGHT and Titan Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both NLIGHT and Titan Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NLIGHT and Titan Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between nLIGHT Inc and Titan Pharmaceuticals, you can compare the effects of market volatilities on NLIGHT and Titan Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NLIGHT with a short position of Titan Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NLIGHT and Titan Pharmaceuticals.

Diversification Opportunities for NLIGHT and Titan Pharmaceuticals

-0.18

Correlation Coefficient

NLIGHT  Titan Pharmaceuticals

Good diversification

The 3 months correlation between NLIGHT and Titan is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and Titan Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Pharmaceuticals and NLIGHT is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on nLIGHT Inc are associated (or correlated) with Titan Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Pharmaceuticals has no effect on the direction of NLIGHT i.e., NLIGHT and Titan Pharmaceuticals go up and down completely randomly.

Pair Corralation between NLIGHT and Titan Pharmaceuticals

Given the investment horizon of 90 days nLIGHT Inc is expected to under-perform the Titan Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, nLIGHT Inc is 1.13 times less risky than Titan Pharmaceuticals. The stock trades about -0.23 of its potential returns per unit of risk. The Titan Pharmaceuticals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  696.00  in Titan Pharmaceuticals on January 30, 2024 and sell it today you would earn a total of  13.00  from holding Titan Pharmaceuticals or generate 1.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

nLIGHT Inc  vs.  Titan Pharmaceuticals

nLIGHT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days nLIGHT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Titan Pharmaceuticals

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Titan Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NLIGHT and Titan Pharmaceuticals

The main advantage of trading using opposite NLIGHT and Titan Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NLIGHT position performs unexpectedly, Titan Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Titan Pharmaceuticals will offset losses from the drop in Titan Pharmaceuticals' long position.

The idea behind nLIGHT Inc and Titan Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.